Hefty Inventory Draw Boosts Oil Prices

A day after the American Petroleum Institute helped push crude prices even higher by estimating a 9.228-million-barrel draw in U.S. crude oil inventories, the EIA confirmed the draw, at 9.9 million barrels for the week to June 22.

This compares with a draw of 5.9 million barrels reported for the prior week and analyst expectations for a draw of 5.1 million barrels.

Amid stubbornly rising oil prices despite the OPEC+ decision to add close to 1 million bpd to global supply, the EIA also reported an increase in gasoline inventories of 1.2 million barrels. That compares with a 3.3-million-barrel increase in gasoline inventories reported for the previous week.

Refineries processed 17.8 million barrels daily last week, with gasoline production at an average 10.1 million bpd, slightly higher than a week earlier.

Distillate inventories remained unchanged, compared with a 2.7-million-barrel increase a week earlier. Production averaged 5.4 million barrels daily, down slightly from 5.5 million barrels daily a week earlier.

Oil prices have remained highly volatile after OPEC’s meeting in Vienna, not least because traders expected a bigger cut but also because the U.S. State Department has increased the pressure on its international allies to stop importing crude oil from Iran. Related: Korea Rapprochement Could Revive Energy Megaproject

Despite President Trump’s tweet campaign against OPEC, in which he accused the cartel of “artificially” keeping prices high, it is now Washington’s determination to cut Iran’s access to international oil markets that is adding fuel to the price rally.

Analysts are already revising their estimates of the supply outage that will result from the entry into force of U.S. sanctions in November, and refiners from Asia are starting to reduce their shipments from Iran.

Additionally, a power outage at a Syncrude oil sands mine in Canada and a spike in oil export uncertainty in Libya have contributed to the higher prices, basically erasing the knee-jerk price decline from last week as the market anticipated OPEC’s decision.

By Irina Slav for Oilprice.com

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